Across The Border | Majority of PSBC’s investors are cornerstones, a concerning trend for IPOs, say experts

State-owned Postal Savings Bank of China (PSBC) launched the world’s largest initial public offering this year, with the vast majority of the deal covered by cornerstone investors, raising concerns that there may be too many cornerstone investors being used in market flotations.

Critics say that large investments by cornerstone investors may push up the offer price and hurt liquidity for IPOs once the shares start trading, as the stock is locked up for a minimum of six months, leaving few remaining H-shares tradable during the period.

The cornerstone money can also pressure the stock as the expiration of the lock-up period nears.

China’s largest bank by number of branches has set the offering price at HK$4.76, near the low end of the indicative range after its offerings got “full, but not great” subscription, people familiar with the matter told the Post. The trading debut is slated for September 28.

Seeking up to HK$62.7 billion in the share offering – the biggest since Alibaba Group’s $25 billion listing two years ago – PSBC’s six cornerstone investors have subscribed around 75.1 per cent of the H-shares, representing 11.3 per cent of its total issued share capital, according to its prospectus.

CSIC Investment One, an overseas investment and financing platform of China Shipbuilding Industry Corporation, and Shanghai International Port Group (HK) are the biggest cornerstones, each subscribing approximately 17 per cent of shares.